Wednesday, April 25, 2012

WAICA needs ethical practice to build public trust

Insurance practitioners in the West Africa sub-region
gathered in the Gambian capital, Banjul to discuss professionalism and ethical
practices in the industry needed to build public trust.

The professionals believe the insurance industry has been
taint by unprofessional and unethical insurance institutions and individuals practitioners,
thus bringing about growing public mistrust and as well a slow growth and
development of the industry in the sub-region.

From April 15-17, 2012, the Insurance Association of the
Gambia, IAG, played host to the 34th yearly general meeting and
educational conference of the West African Insurance Companies Association
(WAICA) on the theme “Professional and Ethical Behaviour in the Insurance
Industry.”

The discussions were centered two topics: “Professionalism
in a highly competitive environment and practice of ethical behaviour in the
development of insurance industry: The role of management; and Professional
insurance under writing and marketing: A must for growth and sustenance of the
insurance industry in West Africa.”

“The theme of the conference is indeed interesting and
appropriate considering the scale and scope of professional deception and
ethical misconduct in the financial system in recent times,” said IAG
president and WAICA vice president, Mr. Dawda Sarge, who warn that “the
consequences of bad business practices could very well jeopardize the
collective efforts to sustain economic growth, employment creation and poverty
alleviation.”

He admits that the insurance industry continues to be
challenged with issues relating to public confidences and trust. Therefore, one
way to reassure society is to prove that an insurance contract “is not about
buying wind but creating energy.”

Sarge noted that an insurer’s reputation is enhanced when he
meets his obligations under the insurance contract and tarnished when he fails
to deliver.

However, he noted that the industry is not all plagued by
malpractices; hence, insurance market activity contributes to economic growth
through financial intermediation, risk transfer and indemnification.

“It promotes entrepreneurial activity and economic stability
by enabling businesses to operate with less volatility.Insurance also serves as an important source
of long-term finance for initiatives in infrastructure improvements as well as
a vector for development,” he said.

Despite these attributes, the insurance profession and
industry continues to suffer from an image blur, caused in part, by
questionable practices and ethical violations.

He opined that a handful of reasons could be responsible for
this such as the proliferation of misleading adverts, mis-selling of insurance
products by poorly schooled agents, contract ambiguities, unfair claims
administration and payouts.

Mr. Sarge, who was later handed WAICA presidency, observed
that the long term profitability and survival of the insurance industry will be
at risk if society continues to take a dim perception of the professionalism
and ethical conduct of insurance practitioners.

He exhort insurers to instill customer trust in insurance
through the promotion of a culture of fair dealing which should transcend the
mere compliance with statutory requirements and global accounting codes like
the International Financial Reporting Standards (IFRS).

“Fair dealing with customers should be an attitude that
springs from ethos and values of our institutions and industry.It should be a culture that puts the consumer
first, that is focused on doing what is right and places a high premium on
integrity and decency,” added Mr. Sarge, before concluding that “the insurance
profession and industry can be the fulcrum of any financial system by raising
practitioners’ awareness and acceptance of professional and ethical behaviour.”

Minuscule growth

The growth of the insurance industry in Africa remains
minuscule despite the fact that insurance has been practiced on the continent
for more than 100 years.

Gambia’s Finance Minister Mambury Njie, whose
statement was delivered by the First Deputy Governor of the Central Bank of the
Gambia, CBG, Mr. Basirou Njie, said Africa has an insurance penetration of
roughly 1%, and less than 10% of the insurable population is actually
insured.

South Africa alone accounted for 70% of African insurance
market.

Notwithstanding, he said the potential for growth of the
insurance industry is huge, but warns that “the industry must offer the right
products to the right segments of the market, leverage on technology to
increase outreach, explore market consolidation in order to reap the benefits
of economies of scale and equally important, formulate and rigorously implement
code of good practices.”

He repeated the industry’s potential to catapult economic
growth and development, saying “the health of a country’s insurance industry is
closely linked to the health of its economy and in addition to providing risks
transfer services, insurance facilitates trade and commerce, mobilizes saving
for investment, and ensures efficient allocation of capital.”

He argues that the Gambia is “unreservedly committed” to the
development of the Gambia insurance industry, citing the 2007 CBG’s regulatory
policy of raising the capital requirement of insurance companies.

This, Mr. Njie said helped strengthen the risk bearing
capacity of insurance companies in the country and enhance their ability to
underwrite “big ticket” risks. “To protect policyholders and ensure that
business is conducted safety and soundly, the industry would continue to be
regulated, but in a manner that does not stifle innovation.”

Speaking earlier, the outgoing presidentof WAICA,Mr Fatai K Lawal, whom Mr. Sarge succeeded, said this year’s conference
is very important in the history of the association as it focus on the
profession and ethics of the insurance practitioners with a view to sanitize
the industry.

He thanked the executive committee of WAICA for the support
given to him during his tenure as the president while urging them to give
similar support to his successor.

The WAICA annual general meeting and educational conference
brought together some 200 insurance practitioners from all the English speaking
countries of West Africa – The Gambia, Nigeria, Liberia, Sierra Leone, and
Ghana – that founded WAICA in 1973.

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